Is Car Financing In Nigeria A Good Idea For You? (A 2022 Guide)
Getting a car can be a significant decision, more so in a peculiar market like Nigeria. One must make sure to avail oneself of the proper opportunities available.
For a myriad of reasons, using other modes of transportation rather than a personal vehicle often proves exhausting. This is why a personally owned vehicle makes all the difference, either for an individual or a business.
Like any major asset, acquiring a car requires a considerable financial commitment. This is why most individuals or businesses do not take it lightly, as it is sure you wouldn’t either.
Interestingly enough, Nigerians are no strangers to car acquisition. The Nigerian Bureau of Statistics (NBS) reported that as of 2018 Nigeria had 11.8 million registered automobiles, with a population of 198 million people, putting the vehicle per population ratio at 0.06.
There were 39 %(4.6 million) privately owned automobiles, 56 % (6.7 million) commercial vehicles, 1.1 %(135,216) government-owned vehicles, and 0.4 % (5,834) diplomatic vehicles registered.
Now if you wish to avail yourself of a vehicle, the normal scenario for acquiring a vehicle would be to pay for it outrightly in cash. Admittedly, this would mean that you have the fee for the car you wish to purchase in its entirety.
If you have some money saved then this could be practical for you. However, purchasing a vehicle outright may limit your choice of vehicle, forcing you to seek a vehicle that barely meets your needs.
This could be in performance, safety features, or embedded technology. Conversely, financially savvy individuals tend to avoid committing large sums of capital to vehicle purchases, when there is an option to have it financed. Rather choosing to invest the funds in more investments.
On the off chance you do not have the funds for your vehicle in its entirety, things may begin to get tricky. You would need to find a way to finance the vehicle somehow. Many intending car owners, resort to acquiring used/pre-owned vehicles, which has now become the norm. Indeed, according to reports, the total number of new car registrations in Nigeria is believed to be around 400,000 every year (excluding motorcycles), with only 5% of those being brand new vehicles.
Most notably, most of the vehicles on Nigerian roads are older than 12 years. The major caveat associated with acquiring used cars is that they do not provide the same opportunities and freedoms as new cars do.
They perform less effectively and over time require more repairs as well as part replacements to keep them running. Inherently, this hikes maintenance costs significantly. Many owners begin to experience buyer’s remorse after purchasing these vehicles.
Other options available include sourcing a bank loan or availing oneself of the services of a car financier.
What is a car loan?
A vehicle loan (also known as an automotive loan or auto loan) is a loan that a person takes out to buy a car. A loan is a sum of money that is lent to an individual, a business, or another organization in general.
The lender is the one who lends money, whereas the borrower is the person who takes out the loan. When a borrower takes out a loan, he or she promises to repay the entire loan amount, as well as any interest (a percentage of the loan amount computed on an annual basis), by a specific date, usually monthly.
Bank Loan Acquisition Process
First, you will be required to present your bank statement. Some companies require a six-month to one-year commitment, while others require a two-year commitment.
The statement of account provides information to the bank about your financial history.
Banks rarely provide 100 % automobile financing; instead, they typically supply at least 60% of the funds, with the remaining funds coming from the borrower.
A proforma invoice from an auto dealer is required before receiving funds from the institution. A proforma invoice is a draft invoice that indicates your interest in the vehicle and its pricing. You must also have paid for car insurance, which is normally 5% of the vehicle’s value. Because banks do not allow third-party insurance companies, the insurance business must be associated with the financing institution.
You contact your account officer and deliver the documentation to the officer after an invoice has been collected and approved. The account officer works with you to ensure that you have filed and been approved for all required paperwork.
Only after approval is the money disbursed to your account after all stages and documents have been completed.
Using A Car Financier
Availing yourself of the services of a car financier such as MAX can make the car acquisition process much easier. For one thing, the required paperwork needed to get your vehicle is significantly less constricting.
In most scenarios, after a meeting with a representative, you can be presented with your vehicle, with a plan to pay in instalments, picking one that is most convenient for you.
Learning about the Nigerian car financing landscape can give you an edge as to the kind of vehicle you can acquire. Make sure you understand the contract’s provisions, such as mileage limitations, balloon payments, and maintenance fees.
It might not be the best financial answer for you if you don’t comprehend it. Your financial advisor will gladly address any inquiries you may have.
About MAX
MAX created a unique credit engine that leverages alternative data to give previously unbanked drivers credit scores and subscription access. Within the previous two years, MAX has grown from 200 to over 60,000 potential drivers seeking car subscriptions and other mobility services on its platform. MAX has raised almost $40 million in venture capital.
MAX’s mission is to use high-performance technology and operators to make mobility safe, affordable, accessible, and sustainable.
MAX’s focus continues facilitating safe, affordable, accessible, and sustainable mobility and the development of African mobility is well underway, with MAX at the forefront, thanks to collaborations, high-performing personnel, and vehicle assets.
